The hours are long, remuneration is down and the organisations are intensely hierarchical. Some MBA students appear to be voting with their feet and walking away from a potential career in investment banking. From private equity to technology, and consulting to investment banking, the best MBA candidates are aggressively courted on campus.

The frenetic annual recruiting season – which typically takes place through January and February – is now out of the way, and students at the leading business schools in Europe will be starting internships or full time roles in just a few months.

One thing is clear: the proportion of those heading for a stint in finance is shrinking.

Right across Europe’s top business schools, newly minted MBAs are opting for Facebook or Amazon rather than JP Morgan or Barclays.

At the London Business School (LBS), 45% of MBAs went on to work in finance in the boom years of 2007 and 2008. Over the past two years, this has fallen to about 30% – a drop from 150 to 110 despite the school increasing its class size by 75 students to 398 over the past five years.

At Cambridge Judge Business School, the percentage leaving to work in investment banking is down from over a third to about a quarter since 2008, according to Conrad Chua, head of admissions at the school. At the Saïd Business School, part of the University of Oxford, the story is similar.

At INSEAD, its latest employment report compiled for the class of 2012 reported that a paltry 14% of graduates had gone into finance, half the figure of 2008.

Leading MBA careers directors said the drop was particularly acute in investment banking. At LBS, 11% of the 2013 class went to work in investment banks, down from 23% in 2010.

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Christelle Cuenin, assistant director of the Career Development Centre at INSEAD, which has campuses in France, Singapore and Abu Dhabi, said: “Some students are looking to work in the buyside more generally – private equity is highly sought after – and outside finance, the technology sector has been attracting quite a lot of candidates and strategy consulting firms also.

“There is still a very committed group of students who want to go into investment banking but that group is getting smaller.”

The reason: changes in supply and demand.

On the supply side, fewer MBAs see a career in finance as alluring as they once did. Although a core group of highly motivated students is still keen on the career, students concerned by the long hours and dwindling pay are looking elsewhere.

And, as one top recruiter put it: “The bulge brackets have not exactly covered themselves in reputational glory over the past five years.” These students are often not short of options. Tony Somers, director of the MBA career management centre at HEC, one of the top French business schools, said that asset management, private banking and private equity were picking up the slack from investment banks. A number of firms on the buyside have been adopting recruiting models based on summer programmes similar to the big banks.

The more daunting competition for talent, however, may be coming from large technology firms.

Online companies

In this year’s outlook report, HEC states that: “Amazon has been a significant recruiter from the programme since 2011, and is likely to be our top recruiter for the graduating class of 2014.” At Oxford Saïd, the firm is already the top recruiter and, at LBS last year, Amazon recruited more students than any of the big banks.

Smaller firms are also providing competition. Many do not have huge resources and are looking for a very specific skillset, forcing them to go after the best graduates in a creative way. One small digital media organisation used social media last month to cherrypick the 40 students at a top business school that it wanted to target.

Chua said we could be seeing a generational shift: “People are getting a wider interest in terms of what they want to do – tech at the moment looks sexy and is getting the big valuations, just as finance was enjoying a boom between 2003 and 2008.”

Meanwhile, even as the competition for the top graduates has intensified, some banks have retreated from campus. JP Morgan recently stopped recruiting from campuses in Emea for its investment bank, although the bank still hires MBAs from the US. Deutsche Bank now recruits 80% to 90% of its MBAs from the US.

One graduate recruiter at a top investment bank said: “There is a big focus on US schools. If schools in Europe are feeling as though there’s a retreat, it may just be that some banks are reducing efforts on certain campuses in Europe.”

There is also less appetite among banks for MBA graduates in sales and trading, with many preferring to train up an analyst. Deutsche Bank, which historically had one of the largest sales and trading MBA classes on the street, has decreased its intake of MBAs for this division by two thirds over the past couple of recruiting seasons.

Banks that still hire MBAs in sales and trading include Bank of America Merrill Lynch, Citi, Credit Suisse, Deutsche, Nomura and HSBC, according to one person familiar with the matter, although many have substantially reduced their intake in recent years. Incoming MBAs are now roughly split 20% in markets and 80% in investment banking, this person said.

For others, however, hiring MBAs, particularly into the investment banking division, remains a key part of their hiring strategy. Goldman Sachs, Credit Suisse and Morgan Stanley are still very active on campus, with MBAs typically recruited at associate level.

Dee Clarke, Emea staffing manager at BAML, said: “We value MBAs for their experience, commercial awareness and strong leadership skills. We’re focusing on the cohort of students that really want finance. It’s extremely competitive. MBA recruiting is very challenging because most of the banks are after the same focused group of candidates.”

To meet this challenge, banks start to build relationships with students as soon as MBA schools allow and will often have separate strategies and approaches for each school, as students respond best to being targeted at different times and in different ways, according to recruiters. A bank’s approach to a given school often relies on staff who attended it.

But some are concerned that these efforts are no longer enough to attract the top students. One leading M&A banker said: “I have no doubts that the best and the brightest are not going into investment banking – we’re not seeing them in interviews.”

One of the deterrents may be the gruelling hours at banks. There have been some calls for change and banks have in recent months wheeled out initiatives to ease the burden on junior staff.

Return on investment

Graduates typically spend tens of thousands of pounds on an MBA and expect a return on their investment, both in terms of salary and lifestyle. At LBS, course fees for the next intake of MBAs are set at £64,000, while both Oxford and Cambridge charge over £40,000 for a year’s tuition.

The rigid hiring process has also been questioned: students typically do a 10-week summer internship before returning to full-time education for one year and starting work full time the following July, making it difficult for those on an atypical career path.

Despite the shift, investment banking remains an attractive career choice for the most talented graduates and some, such as JP Morgan, expect a small uptick in recruitment this year.

Somers at HEC said the large investment banks could still afford to be highly selective over candidates: “The reality is that if we get Goldman Sachs on campus our students are very happy with that. Many of them are still very conservative.”

--This article was first published in the print edition of Financial News dated March 24, 2014